From January 17th to 21st, ICE cotton futures reached new highs driven by fundamentals and overall optimism about commodities. The highest settlement price of the main March contract was close to 124 cents/pound, and the weekly price rose for the seventh consecutive week. Counting from late December 2021, cotton prices have been rising again for more than a month.
Currently, there is still a lot of speculative long behavior in the market, whether it is fundamental, technical or financial. A recent feature is that as the U.S. stock market plummets as the Federal Reserve approaches to raise interest rates, a large amount of stock market funds have moved to commodity futures, bringing a new round of impetus to commodities. The large amount of hot money released by the stock market will provide cotton, wheat, Agricultural products such as corn and soybeans bring new excitement. As hyper-inflation continues to intensify, the cost of crude oil has risen sharply, and the prices of other raw materials have further followed suit, which is also evident from the trend of the CRB index.
According to foreign media, China is still continuing to purchase large quantities of US cotton, and textile mills are actively inquiring every day, especially for immediate and recent shipments. Foreign analysts believe that this is related to the U.S. ban on importing Xinjiang cotton products. On the other hand, the price of Chinese cotton is 25-35 cents higher than that of U.S. cotton. U.S. cotton always has strong competitiveness. In addition, the recent export of Indian cotton The obstruction has also increased the pressure on global cotton supply.
So far, although the near-far month price difference (July/December) of ICE futures is still above 15 cents, the Xinhua December contract has also risen to a maximum of 99.18 cents, which is only one step away from the 100 cent mark. And the trend is more stable than this year’s contract, which can be said to be one step at a time. In a few months, the December contract will dominate the cotton market in the second half of the year. Due to the large increase in this year’s contract, there has been a correction trend in the near future. If the new year’s contract remains steady, the price difference between the near and far month contracts is expected to gradually narrow.
In the short term, the urgent demand from global textile mills has provided solid support for recent-month contracts. Excluding the impact of special events, prices may remain strong in the next 2-3 months.
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